In re Green, Bankruptcy No. 4-92-6222.
| Citation | 151 BR 501 |
| Decision Date | 01 March 1993 |
| Docket Number | Bankruptcy No. 4-92-6222. |
| Parties | In re Cecil GREEN and Ann Renae Green a/k/a Ann Renae Beck, Debtors. |
| Court | United States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — District of Minnesota |
Stephen P. Thies, Chanhassen, MN, for debtors.
Thomas J. Lallier, Mackall, Crounse & Moore, Minneapolis, MN, for General Motors Acceptance Corp.
Stephen Creasey, Minneapolis, MN, for Chapter 13 Trustee.
The above-entitled matter came on for hearing before the undersigned on the 11th day of November, 1992, on confirmation of the debtors' chapter 13 plan. Amicus briefs1 were submitted by Linda Jeanne Jungers for Ford Motor Credit Co., Thomas E. Hoffman for Norwest Bank Minnesota, Daniel W. Stauner for Community Credit Co, and Thomas Sandstrom for Cityside Savings and Financial Services Co.
On September 30, 1989, Cecil and Ann Renae Green (the "debtors") purchased a 1989 Hyundai Excel pursuant to a retail installment sales contract for $9,252.74. The contract was assigned to General Motors Acceptance Corporation ("GMAC"). GMAC holds a security interest in the vehicle pursuant to the contract, and it duly perfected its security interest under Minnesota law.
On September 11, 1992, the debtors filed a joint petition under chapter 13. At the time of filing, the remaining balance on the contract was $3,945.82, and the debtors intend to retain and use the vehicle for normal purposes. The debtors filed a chapter 13 plan along with their petition wherein they propose to allow GMAC's lien to remain in effect, and to pay GMAC $1,925 plus interest over approximately two years on its allowed secured claim. The balance of GMAC's claim would be paid approximately 19% over the life of the chapter 13 plan as a general unsecured claim.
On October 15, 1992, GMAC objected to the plan arguing that it failed to provide GMAC with the allowed amount of its secured claim.
GMAC and amici take the position that the allowed amount of GMAC's claim is $2,875 based on the September 1992 NADA Official Used Car Guide (Midwest Edition) retail value for a 1989 4-door Hyundai Excel Sedan. Since the present value of the payments to be made to GMAC on account of its allowed secured claim is only $1,925, GMAC and amici argue that the plan should not be confirmed.
The debtors argue that the allowed amount of GMAC's secured claim is only $1,925 based on the September 1992 NADA Official Used Car Guide (Midwest Edition) wholesale value for a 1989 4-door Hyundai Excel Sedan. Since the present value of payments to be made under the plan is $1,925, the debtors assert that the plan should be confirmed.
The debtors and GMAC have stipulated that $1,925 and $2,875 are the appropriate wholesale and retail values respectively, according to the September 1992 issue of the NADA Official Used Car Guide (Midwest Edition).
The case before me today requires a determination of the proper method of valuing an undersecured creditor's allowed secured claim for the purpose of confirming a chapter 13 plan that a debtor proposes to cram-down on such creditor. There are a multitude of published cases on this issue.2 The only thing more staggering than the sheer number of the decisions is the variance among them. One case in this district directly addressed the proper method of valuation in confirming a plan that proposes to cram-down a secured creditor in the chapter 11 context. In re Bergh, 141 B.R. 409 (Bankr.D.Minn.1992). However, there are no cases decided by the United States Bankruptcy Court for the District of Minnesota, the United States District Court for the District of Minnesota, or the Eighth Circuit Court of Appeals addressing the specific issue of whether to use wholesale or retail, and whether to deduct costs, when valuing an undersecured creditor's allowed secured claim in the context of a cram-down in chapter 13.
Accordingly, analysis starts with the text of the statute, construing its terms according to their plain meaning. Patterson v. Shumate, ___ U.S. ___, ___, 112 S.Ct. 2242, 2246, 119 L.Ed.2d 519 (1992); Toibb v. Radloff, 501 U.S. ___, ___, 111 S.Ct. 2197, 2199, 115 L.Ed.2d 145 (1991). In so doing, each term must be given effect so as to avoid rendering any part of the statute inoperative. United States v. Nordic Village, Inc., ___ U.S. ___, ___, 112 S.Ct. 1011, 1015, 117 L.Ed.2d 181 (1992); Mountain States Telephone & Telegraph Co. v. Pueblo of Santa Ana, 472 U.S. 237, 249, 105 S.Ct. 2587, 2594, 86 L.Ed.2d 168 (1985); Reiter v. Sonotone Corp., 442 U.S. 330, 339, 99 S.Ct. 2326, 2331, 60 L.Ed.2d 931 (1979); Colautti v. Franklin, 439 U.S. 379, 392, 99 S.Ct. 675, 684, 58 L.Ed.2d 596 (1979). If a term is unambiguous, its plain meaning controls without reference to the legislative history, except in the rare circumstance where use of the plain meaning would produce a result clearly at odds with the legislative intent. United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 242, 109 S.Ct. 1026, 1031, 103 L.Ed.2d 290 (1989); Rodriguez v. United States, 480 U.S. 522, 526, 107 S.Ct. 1391, 1393, 94 L.Ed.2d 533 (1987); Demarest v. Manspeaker, 498 U.S. 184, 190, 111 S.Ct. 599, 604, 112 L.Ed.2d 608 (1991). If a term is ambiguous, the term should be construed consistently with other terms in the statute so as to produce a symmetrical whole and avoid creating tension in the statute. Federal Power Commission v. Panhandle Eastern Pipeline Co., 337 U.S. 498, 514, 69 S.Ct. 1251, 1260, 93 L.Ed. 1499 (1949); see also Freytag v. Commissioner of Internal Revenue, ___ U.S. ___, ___, 111 S.Ct. 2631, 2638, 115 L.Ed.2d 764 (1991). In so construing ambiguous terms, the legislative history should be consulted to determine the meaning that fits most logically into the corpus juris. West Virginia University Hospitals v. Casey, ___ U.S. ___, ___, 111 S.Ct. 1138, 1148, 113 L.Ed.2d 68 (1991); see also Freytag, ___ U.S. at ___, 111 S.Ct. at 2638.
Section 1325(a)(5)(B) of the Bankruptcy Code provides that if a debtor in chapter 13 intends to retain property subject to a lien and the party holding the allowed secured claim does not accept the plan, the chapter 13 plan must still be confirmed where:
11 U.S.C. § 1325(a)(5)(B). Here, the plan provides that GMAC will retain its lien, so the sole question is whether the value of payments to be made under the plan equals the allowed amount of GMAC's secured claim. The amount of GMAC's secured claim is determined according to the dictates of section 506(a) which provide in relevant part:
An allowed claim of a creditor secured by a lien on property in which the estate has an interest . . . is a secured claim to the extent of the value of such creditor\'s interest in the estate\'s interest in such property, . . . and is an unsecured claim to the extent that the value of such creditor\'s interest . . . is less than the amount of such allowed claim. Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor\'s interest.
11 U.S.C. § 506(a).
One line of cases interpreting section 506(a) determines that the critical language of section 506(a) is the language of the first sentence which provides that the creditor's claim is secured to the extent of the value of such creditor's interest in the estate's interest in such property. See, e.g., GMAC v. Mitchell (In re Mitchell), 954 F.2d 557, 560 (9th Cir.), cert. denied, ___ U.S. ___, 113 S.Ct. 303, 121 L.Ed.2d 226 (1992); Overholt v. Farm Credit Services (In re Overholt), 125 B.R. 202, 214 (S.D.Ohio 1990); In re Robbins, 119 B.R. 1, 3 (Bankr. D.Mass.1990); In re Smith, 92 B.R. 287, 290-91 (Bankr.S.D.Ohio 1988); In re Boring, 91 B.R. 791, 795 (Bankr.S.D.Ohio 1988); In re Claeys, 81 B.R. 985, 990-91 (Bankr.D.N.D.1987). According to such language, the property interest being valued is the creditor's lien interest in the collateral and not the debtor's ownership interest. These courts then reason that a lien is simply a right to take possession of the collateral and sell it in satisfaction of an obligation. Therefore, the value of the lien is equal to the amount the creditor could receive upon sale of the collateral. Grubbs v. National Bank of South Carolina (In re Grubbs), 114 B.R. 450, 451 (D.S.C.1990); Valley Nat'l Bank v. Malody (In re Malody), 102 B.R. 745, 749 (Bankr. 9th Cir.1989). Such reasoning generally results in two conclusions: First, the appropriate value of the lien interest should be based on the wholesale value of the collateral rather than its retail value, since the creditor is generally not considered a "dealer" in the collateral and therefore could not sell it at retail; and second, costs of sale should be deducted from the value of the collateral to arrive at the value of the lien interest, since such costs would have to be incurred by the creditor in taking possession of and selling the collateral. See, e.g., Mitchell, 954 F.2d at 560 (); Grubbs, 114 B.R. at 451-52 (same); Malody, 102 B.R. at 750 (same); Robbins, 119 B.R. at 4 (); Overholt, 125 B.R. at 215 (same); Smith, 92 B.R. at 290 (same); Boring, 91 B.R. at 795 (same); Claeys, 81 B.R. at 992 (same).
A second line of cases, including Judge Kressel's decision in Bergh, focuses instead on the language of the second sentence of section 506(a) which provides that the creditor's lien interest must be valued in light of the purpose of the valuation and the proposed disposition or use of the collateral. See, e.g., Brown & Co. Securities Corp. v. Balbus ...
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